U.S. stocks were higher as Alcoa Inc.
AA, -3.65%
kicked off earnings season with better-than-expected profits, overshadowing a request from the Food and Drug Administration that Pfizer inc.
PFE, -1.23%
pull its Bextra drug from the market. See Market Snapshot.

Back in Europe, data and interest rates provided the focus for markets. Monetary policy makers at both the European Central Bank and the Bank of England left interest rates unchanged amid weak economic growth in the euro zone and slower consumer spending in the U.K. See London Calling.

Currently, interest rates stand at 4.75% in the U.K. and at 2% in the euro zone.

"In the U.K., the evidence in the household sector has been of continued weakness...the data we've seen for fourth-quarter housing consumption was weak, retail sales numbers were quite weak as well so far this year, and the messages from the housing market have been quite mixed," said Marchel Alexandrovich, an economist at Dresdner Kleinwort Wasserstein.

"We don't think rates will be going up - we think they will start heading down towards the end of this year," said Alexandrovich.

Dresdner forecasts are for U.K. interest rates to end the year at 4.5%, after going down by a quarter-point in November, he said.

"For the euro zone, there's no expectation of a change this month. The data has been quite weak over the last month," he added.

"We see (euro zone) rates going up later this year but very, very marginally - to 2.25% in the fourth-quarter and then a quarter percent rise in the first quarter (of 2006)," added Alexandrovich.

In the U.K., government figures also showed that manufacturing output fell by 0.5%, against expectations of a modest increase. This is the first fall in U.K. monthly output data since August, when it showed a 0.6% decline.

And German industrial output fell 2.2% on a seasonally-adjusted basis in February, from January, AFX News reported from Frankfurt. Economists had forecast on average a month-on-month decline of 1.3%, AFX said.

The dollar declined nearly 0.3% against the euro, last at $1.2905, but was steady against the British pound, trading down 0.1% at $1.8775.

Retail stocks in focus

Retail stocks were drawing attention in Europe following reports that Christoph Achenbach, the CEO of German retailer KarstadtQuelle (627500), agreed to step down at a supervisory board meeting on Wednesday.

Achenbach no longer sees any basis for a trusting relationship with the board, following a wave of press speculation that he was about to be replaced, AFX News reported.

Shares finished 0.9% higher in Frankfurt.

And in the U.K., pharmacy retailer Boots Group (BOOT) shares dropped 0.7% after another profit warning from the group. Boots cautioned that "lower consumer spending and infrastructure costs" are expected to lead to lower operating profits at its Boots The Chemist chain next year.

The company said it will sell its Boots Healthcare International division. Boots also said it has proposed a sale and leaseback arrangement for 300 small stores, which is expected to raise around 250 million pounds.

It said same-store sales in the fourth quarter fell 0.9% at its BTC chain, reflecting the "general slowdown" in U.K. retail, and sees current fiscal 2004 same-store sales growth of 2.3%.

British venture capitalist investor 3i Group (III) fell 0.5% after a report in The Times (of London) that it's planning to sell its legacy portfolio of around 800 minority investments to bolster profits.

The portfolio includes companies like Cannon Avent, which makes baby items and car mats. Analysts have valued the portfolio from 500 million to 1 billion British pounds, the report said. The sales are seen taking around two years to complete.

Airline traffic data

Air France-KLM
AKH, -7.14%
(003112) reversed earlier gains to trade 0.2% lower. It said that traffic in March rose 6.2% to 5.56 million passengers as the load factor, a measure of passengers to empty seats, rose 1.7 percentage points to 80.1%.

Low-cost U.K. airline EasyJet (EZJ) jumped 4.3% in London after it said that passenger traffic in March rose 28.9% on the year to 2.573 million as its load factor increased 4.3 percentage points to 86.9%

Banking, telecoms

In the Italian banking sector, Banca Popolare di Lodi announced that it now holds 10.82% of Banca Antonveneta, fueling speculation that it could make a rival bid for the Italian banking group.

At the end of March, Dutch banking group ABN Amro
ABN, -2.56%
(30110) said that it's offered 25 euros a share to buy Italian bank Banca Antonveneta in a cash deal valued at 6.3 billion euros ($8.1 billion). The offer is expected to be launched after April 15.

Separately, Deutsche Bank said that it has removed the Dutch bank from its pan-European focus list, citing uncertainties after the recent profit warning, equity raising and bid for Antonveneta.

"Although the shares may rally in the short term on continuing bid speculation, the fundamentals are much less clear," Deutsche Bank said.

ABN shares slipped 0.7% in Amsterdam.

Deutsche Telekom
DT
(555750) shares ticked 0.3% lower in Frankfurt after it asked its shareholders to approve an AGM motion authorizing the company to issue up to 5 billion euros in bonds by April 25, 2010, according to the AGM agenda published on the company's website, AFX News reported.

A Deutsche Telekom spokesman said the company has no plans at the moment to issue the convertible bond, the news service said.

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